Abercrombie Cuts Sales Outlook, Flags Weak Holiday Demand

Abercrombie & Fitch Co. lowered its annual sales growth forecast, signaling a shift toward more cautious discretionary spending during the critical holiday quarter. The announcement sent shares down 17% in early trading, marking the stock's worst single-day performance since May 2022.

The apparel retailer now expects annual net sales growth of at least 6%, down from its previous forecast of 6% to 7%. For the fiscal quarter ending in February, the company projects net sales growth of approximately 5%, below Wall Street expectations of a 5.8% increase.

The revised outlook reflects a broader trend of value-seeking behavior across the retail sector. "The theme of value-seeking behavior was on full display in this morning's slew of retail pre-announcements," said Michael Gunther, analyst, Consumer Edge. He noted a continued shift toward affordable options, even among high-income consumers, as economic uncertainty persists.

Contrasting Performance and Market Dynamics

The update contrasts with Abercrombie’s performance earlier in the fiscal year. In November, the company raised its annual profit forecast, citing strong demand for its Hollister brand and resilient spending by higher-income consumers. In the third quarter ended Nov. 1, net sales rose 7% to US$1.29 billion, exceeding the analyst consensus of US$1.28 billion.

Adjusted earnings for the quarter reached US$2.36 per share, beating expectations of US$2.16. Despite the downward revision to its sales growth outlook, the company’s third-quarter performance was driven by a sharp merchandising strategy and a strong focus on customer engagement. “The company’s success is being driven by a sharp merchandising strategy and a consumer-centric focus, which have enabled it to maximize full-price sales and deepen customer engagement,” said Rachel Wolff, analyst, Emarketer.

Hollister, which accounts for more than half of Abercrombie’s total revenue, posted 15% comparable sales growth in the third quarter. The result was supported by a strong back-to-school season and the launch of fall collections. Analysts also noted that Abercrombie has benefited from a broader “denim boom” across the industry. “Like Gap and Levi Strauss, Abercrombie is benefiting from the denim boom—and is likely to continue doing so as shoppers concentrate spending on retailers offering a compelling mix of style and affordability,” Wolff said.

Strategic Partnerships and Operational Headwinds

To maintain relevance and attract new customer segments, Abercrombie has pursued high-profile collaborations, including partnerships with Crocs and the NFL. The company also launched a Cyber Monday collaboration with Taco Bell aimed at driving store traffic and digital engagement.

These initiatives are unfolding against a complex macroeconomic backdrop. Ongoing uncertainty around US trade policy and potential tariff changes has increased pressure on apparel and footwear companies to manage costs and mitigate supply-chain risks.

For fiscal year 2025, Abercrombie expects earnings per share of between US$10.20 and US$10.50. The midpoint of the range remains slightly above the company’s prior guidance of US$10.00 to US$10.50, reflecting strong performance in the first three quarters despite more conservative holiday expectations.

Broader Sector Implications

Abercrombie’s update was part of a wave of retail disclosures ahead of this week’s ICR industry conference, signaling slower holiday sales growth compared with last year. While some peers, such as Lululemon, reported results at the upper end of their guidance, much of the apparel sector—including Urban Outfitters and American Eagle—faced share price pressure following cautious outlooks.

The revised forecast underscores the challenge retailers face in sustaining the rapid growth achieved in recent years. As 2026 begins, the sector is increasingly shaped by a more price-conscious and selective consumer, forcing brands to defend margins while maximizing full-price sales.

In Mexico, retailers face similar headwinds amid a slower-than-expected recovery in consumer spending. According to NielsenIQ’s Consumer Outlook: Guide for 2026, accumulated inflation, geopolitical uncertainty and a cooling labor market have led to declining sales volumes across most product categories.

Raquel Jiménez Padilla, director of customer success, Nielsen Mexico, said the current economic and political environment has produced a more restrained consumer. The report shows that while some shoppers feel more financially secure, 21% of Mexicans have yet to recover their pre-pandemic economic position, and 40% continue to limit spending despite not experiencing a direct loss of income.

Abercrombie executives said on a post-earnings call that while demand remains solid for certain categories, such as Hollister dresses and jackets, the company will continue to navigate what it described as a “dynamic” consumer environment.